Steven Metro, a Katonah resident, was charged along with co-defendant Vladimir Eydelman of Colts Neck, N.J., in an insider-trading case by the Securities and Exchange Commission and the U.S. Department of Justice.

Mr. Metro, who worked at a law firm, is alleged to have passed insider information to a third-party middleman who passed it to Mr. Eydelman, a stockbroker who worked at Oppenheimer and Co. and Morgan Stanley. Carrying the information on napkins or Post-it notes, the middleman arranged meetings with Mr. Eydelman in Grand Central Station to pass along the stolen information. After reading the tips, the middleman would chew up or swallow the napkin or Post-it note to destroy the evidence. Over the course of three and a half years, this insider-trading scheme involved transactions in at least 13 issuers’ securities involving more than $33 million in trades. The illegal transactions yielded over $5.6 million in profits to the defendants and the middleman, their families and friends and Mr. Eydelman’s customers. The middleman is serving as a confidential witness in the U.S. Department of Justice investigation.

U.S. Attorney Paul J. Fishman announced Wednesday that both Mr. Metro and Mr. Eydelman are charged with one count of conspiracy to commit securities fraud as well as multiple counts of securities fraud and tender offer fraud: Mr. Metro is charged with nine counts of securities fraud, while Mr. Eydelman is charged with eight counts of securities fraud, and each defendant is charged with four counts of tender offer fraud. FBI agents arrested Mr. Metro in Katonah and Mr. Eydelman in Colts Neck on Wednesday. Both men appeared before U.S. Magistrate Judge Madeline Cox Arleo in Newark Federal Court on Wednesday afternoon.

According to the Securities and Exchange Commission complaint, Mr. Metro, 40, had been working as a managing clerk at the international law firm Simpson Thacher. He has a law degree from Touro College of Law in Central Islip but is not a practicing attorney. Mr. Metro and the middleman are friends who met in approximately 1995, during their first year of law school.

According to the SEC, the international law firm where Mr. Metro served as legal adviser to many companies considering corporate transactions or acquisitions. Beginning in 2009, Mr. Metro accessed nonpublic information on Simpson Thacher’s computer systems in order to identify documents establishing that a client of the firm was about to participate in a corporate transaction. Mr. Metro and the middleman established a course of conduct to minimize the possibility of detection. They intentionally limited telephone and text communications to seemingly innocuous statements such as “let’s meet for coffee.” Following these communications, they would meet at bars and coffee shops in New York City, and Mr. Metro would convey the material to the middleman by pointing to the stock ticker symbols on his smartphone.

The middleman would pass the information to Mr. Eydelman by showing him a Post-it note or napkin on which the middleman had written the stock ticker symbol of the company to be acquired. The middleman then chewed up, and sometimes ate (with Eydelman watching), the Post-it note or napkin to destroy evidence of the tip. The middleman also conveyed to Mr. Eydelman at this time the approximate transaction price and timing of the deal.

Following the interaction, Mr. Eydelman would typically return to his office, gather research relating to the target company and email the middleman the results of the research and/or Mr. Eydelman’s supposed thoughts as to why buying the stock made sense — allegedly with the intent of creating a paper trail of false and contrived emails serving as nonfraudulent bases for the illegal trading by the middleman and Mr. Eydelman.

“Mr. Metro’s conduct was neither isolated nor aberrational,” states the SEC in its complaint. “Mr. Metro knowingly or recklessly passed to the middleman information Mr. Metro knew to be material and nonpublic, over and over again, on at least 13 occasions. Mr. Metro knew that trading on material, nonpublic information was wrong, and he attempted to conceal his participation in the scheme by entering into an agreement with the middleman whereby the middleman would keep proceeds due to Mr. Metro in the middleman’s brokerage account for later distribution. Mr. Metro further knew that the middleman received contrived emails from his broker for the purpose of providing purportedly legitimate bases for their trading.”

“These defendants are charged with using confidential information that Mr. Metro stole from his employer to reap huge illegal profits,” Mr. Fishman said. “They allegedly rigged the system by exploiting sensitive information that was not available to other investors. This kind of activity undermines the integrity of our financial markets and weakens investor confidence.”

The SEC seeks permanent injunctions against each of the defendants, including a return of all profits, and civil penalties.

The Department of Justice conspiracy count with which Mr. Metro and Mr. Eydelman are each charged carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the aggregate loss to victims or gain to the defendants. On the substantive securities fraud and tender offer fraud charges, they each face a maximum of 20 years in prison and a $5 million fine. The complaint also seeks the forfeiture of Mr. Eydelman’s residence.

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